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Last Updated: Thursday, 30 August 2007, 22:48 GMT 23:48 UK
Two years on, New Orleans stalls
By Steve Schifferes
Economics Reporter, BBC News

Damaged houses in the Lower Ninth Ward
Two years on, many homes have still not been rebuilt
Two years after Hurricane Katrina devastated New Orleans, the city has still only partly recovered economically - and much rebuilding, especially of the public sector, has stalled.

Americans were shocked by the pictures of the destruction of the Crescent City in August 2005.

The categorical drops in jobs paint a picture of a devastated economy
Elliot Stonecipher, demographer

Two weeks after the storm, President Bush went to New Orleans to pledge that America "will do what it takes" to rebuild the city.

But two years on, although the New Orleans region has undergone a significant economic recovery, the city is still far from rebuilt.

In particular, the city has struggled to rebuild its public services, and the state and Federal government have failed to provide the assistance needed for individuals to rebuild their homes.

"Without strong leadership it is likely to be a long time before greater New Orleans is again a safe, robust city for all its inhabitants," says Amy Liu, deputy director of the Brookings Institution's Metropolitan Policy Program, which has been tracking the city's progress.

Missing people

Its figures paint a dramatic picture of jobs and housing decline in the central city area.

households receiving mail

During the storm's aftermath, thousands of residents were evacuated from the city.

Two years later, one in three households have still not returned, and the population has dropped from 455,000 to 274,000.

Poor households with children are particularly likely to have stayed away, with the number of children in public schools at only 40% of its pre-Katrina level.

To some extent, migrants from Mexico and Central America have replaced Afro-Americans in New Orleans, with an estimated additional 100,000 Hispanic people in the region.

They have been attracted by some of the relatively well-paying jobs in construction and tourism.

Looking for jobs

But overall, the New Orleans metro area employs 113,000 fewer people than in August 2005, and the pace of job creation has slowed to a crawl.

Evacuation at the Superdome
Thousands were evacuated from New Orleans after the storm

The biggest declines were in tourism jobs (down 24,500), government jobs (down 29,000) and healthcare jobs (down 23,000).

And 4,000 smaller firms closed after the storm.

"We apparently are at a place where the post-storm employment recovery is peaking," said demographer Elliot Stonecipher. "Those categorical drops in jobs paint a picture of a devastated economy and we have to stop acting like they didn't happen."

Big business has also failed to return to the city, with New Orleans' only Fortune 500 company, Freeport-McMoron, departing to Arizona following its takeover of Phelps Dodge, while oil companies Chevron and Shell are moving jobs elsewhere.

Employment and job creation is stronger across the region, especially in the less devastated parishes, while along the Gulf Coast, major shipbuilding companies have returned to cities like Biloxi, Mississippi and some smaller start-ups.

Homes loss

Business have been put off by the continuing lack of public services, the high crime rate, and Louisiana's reputation for corruption.

Real estate agent signs on damaged buildings in New Orleans
There were many distressed sales of flood-damaged homes

But for most individuals, the biggest problem is the slow pace of government help for rebuilding their homes.

Less than one in four of the 182,000 homes damaged by the floods have received government grants under the "Road Home" programme funded by the Federal government but administered by the state of Louisiana.

As a result, house prices on the east bank of New Orleans, where the flooding was most severe, have dropped by 20% since Katrina, and ten times more homes are on the market than are sold each month.

On the other hand, rents have soared as workers moving into the area scrambled to find the scarce undamaged accommodation.

According to Brookings, although the US government has allocated over $100bn to the emergency, "the reality is that relatively few dollars have been dedicated to the actual rebuilding effort and few estimated dollars have reached state and local governments."

Public services

Perhaps the biggest obstacle for individuals who want to return is the poor state of public services, which are still running at less than half their level before Katrina.

Less than half of the public schools in New Orleans have re-opened, and student performance has declined sharply, while 41% of private schools have also closed.

And other public services are in even worse condition.

Local police during Katrina
Local police were hard-pressed as looting followed devastation

New Orleans only has 19% of the buses it had before the storm, and the route network has been cut by 50%.

It has only one-third of the number of child-care facilities, and half the number of hospitals it had in 2005.

And the lack of housing and other facilities has impacted on recruitment of public sector and healthcare workers, with the police and fire department also hit.

Two police divisions and the central evidence division continue to operate out of temporary trailers, and the police have only a partially functioning crime lab.

This in turn has affected the crime rate, which is the highest of any major US city.

Fifty years ago, economist John Kenneth Galbraith coined the phrase "private affluence, public squalor" to explain the paradox of the world's richest country failing to invest in public rather than private goods.

The plight of New Orleans would have provided him with a rich example of this phenomenon.

Decline of public services in New Orleans

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